Daily Comment (September 3, 2021)

by Bill O’Grady, Thomas Wash, and Patrick Fearon-Hernandez, CFA

[Posted: 9:30 AM EDT] | PDF

Good morning! U.S. equity futures are signaling a higher open this morning. Today’s report begins with a discussion about the labor shortage and an update on Hurricane Ida. International news is up next. We cover U.S. economics and policy news, including details about the spending bill.  China news follows, and we end the report with our pandemic coverage.

Labor shortage: Next week, the enhanced unemployment benefits are set to expire nationwide. A massive labor shortage has led many to suspect that ending these benefits could lead to a surge of new entrants into the labor market. However, data released from the Bureau of Labor of Statistics suggests that this expectation may not happen. In June and July, roughly half of the states in the country exited the program that funded the enhanced unemployment benefits. Although the exiting states saw a sharper decline in the number of initial claims filed compared to the states that remained in the program, these states also had a slower increase in the number of workers entering the labor force.

It should be worth noting that the time frame is too short to make any concrete conclusions. However, if the trend holds, it will likely mean that firms may have to increase their wages in order to attract more talent. In fact, there is growing evidence that firms have already begun to do so. Some firms that have been reluctant to raise wages have pressured the government to relax visa requirements to help resolve the worker shortage. Recently, fleet operators have petitioned Washington to allow more foreign operators into the country in order to resolve the shortage of truck drivers. If labor market conditions continue to show evidence of being rigid and tight, it will support the possibility of longer-term inflation. In this event, the Federal Reserve could become more assertive as it attempts to remove policy accommodation.

Hurricane Ida: Hurricane Ida continues to cause damages throughout the country. In the Northeast, there were over 45 deaths due to floods related to the storm.  In response to the mounting damages to property as well as temporary disruptions to businesses, the government has offered some support. The U.S. Energy Department announced that it will release 1.5 billion barrels of crude oil from the Strategic Petroleum Reserve to mediate price pressures. Meanwhile, the Federal Emergency Management Agency (FEMA) is expected to use funds to help local victims of the disaster. As of right now, departments have been able to meet the needs of regions impacted by the storm. However, as the costs of damages become more apparent, Congress will likely fight over additional assistance which could lead to further delays in President Biden’s economic agenda.

International news: 

 Economics and policy:


COVID-19: The number of reported cases is 219,126,141 with 4,542,726 fatalities.  In the U.S. there are 39,550,163 confirmed cases with 643,683 deaths.  For illustration purposes, the FT has created an interactive chart that allows one to compare cases across nations using similar scaling metrics.  The FT has also issued an economic tracker that looks across countries with high-frequency data on various factors.  The CDC reports that 445,672,595 doses of the vaccine have been distributed with 372,116,617 doses injected.  The number receiving at least one dose is 205,911,640, while the number of second doses, which would grant the highest level of immunity, is 174,973,937.  The FT has a page on global vaccine distribution.

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